THE DCIT, CIRCLE-1, AHMEDABAD vs. M/S. ARVIND MILLS LTD., AHMEDABAD

With this appeal, the Revenue has challenged the correctness of the order of the Ld. CIT(A)-VI, Ahmedabad dated 11.11.2013 pertaining to A.Y. 2004-05.

The roots for the levy of penalty lie in the assessment order dated 30.12.2008 framed u/s. 143(3) r.w.s. 147 of the Act.

Facts on record show that the return of income was filed on 30.10.2004 declaring NIL income. For the computation of MAT u/s. 115JB of the Act, the assessee declared book profit of Rs. 101.28 crores and claimed deduction u/s. 80HHC of the Act as per book profit of Rs. 11.57 crores and further claimed brought forward business losses/depreciation to the extent of Rs. 296.11 crores thereby making the book profit at Rs. NIL. The assessment was framed u/s. 143(3) of the Act vide order dated 29.12.2006.

Thereafter, an order was framed u/s. 154 of the Act and the claim of brought forward business loss/unabsorbed depreciation was reduced from 205.44 crores to 164.36 crores.

Having reasons to believe that some income chargeable to tax had escaped assessment for the year under consideration, after recording reasons, a notice u/s. 148 of the Act was issued and served upon the assessee. The re-assessment order was completed and the claim of the assessee were rejected and working of MAT was computed as under:- 1. Net profit as per books 1012842940 Less: Set off of b/f business loss or depreciation which ever is lower to 1012842940 the extent Book Profit u/s. 115JB NIL

Penalty proceedings were separately initiated for furnishing inaccurate particulars/concealment of income. The assessee challenged the re-assessment order and the matter travelled up to the Tribunal and the Tribunal in ITA Nos. 673 & 269/Ahd/2011 by its order dated 23.07.2015 quashed the assessment framed u/s. 143(3) r.w.s. 147 of the Act. The relevant findings of the Co- ordinate Bench reads as under:- 6.1. In view of the binding precedent, we are of the considered view that it is not the case where the material was not available with the AO and AO has not applied his mind in the case under appeal. Therefore, we hold that the reopening of the assessment is made on the basis of change of opinion only as the Id. counsel for the assessee has demonstrated from the records that all information/details were available with the AO and the AO has applied his mind on the allowability of deduction u/s.80HHC and computation of book profit. Therefore, order under appeal is set aside and assessment framed u/s. 143(3) read with section 147 is quashed being invalid.

“Sublato Fundamento Cadit Opus”- when the foundation is removed, the super structure must fall. Since the re-assessment order has been quashed by the Tribunal there remains no foundation for the levy of the impugned penalty.